Consumer Search and Choice Overload

Volker Nocke and Patrick Rey

No 16440, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We consider a multiproduct seller facing consumers who must search to learn prices and valuations. The equilibrium features choice overload: the larger the product line, the fewer consumers start searching. We provide conditions under which the seller offers too much or too little variety. We then allow the seller to position products or make recommendations, thereby introducing the possibility of directed search, and show that the seller may find it profitable to maintain some noise. Finally, we study the seller's incentive to disclose product identity and extend our analysis to that of a platform choosing which sellers to host.

Keywords: Sequential consumer search; Product variety; Choice overload; Multiproduct firm; Platform (search for similar items in EconPapers)
JEL-codes: D42 L12 L15 (search for similar items in EconPapers)
Date: 2021-08
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